Legislature(2003 - 2004)
01/21/2004 02:26 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 21, 2004
2:26 P.M.
TAPE HFC 04 - 9, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 2:26 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Carl Moses
MEMBERS ABSENT
Representative Reggie Joule
Representative Bill Stoltze
ALSO PRESENT
Sue Stancliff, Staff, Representative Pete Kott; David Teal,
Director, Legislative Finance Division
PRESENT VIA TELECONFERENCE
James Brennan, Attorney, Hedland Brennan, Heideman and
Cooke, Anchorage; John Lynch, Truck Renting & Leasing
Association, Alexandria, Virginia; Michael Bell, Alaska
Trucking Association, Anchorage; Janis Hales, Revenue
Auditor, Tax Division, Department of Revenue, Anchorage;
Chris Fischer, Cab Driver, Kachecab, Homer
SUMMARY
HB 347 An Act exempting taxicabs from the passenger
vehicle rental tax; and providing for an effective
date.
HB 347 was HEARD and HELD in Committee for further
consideration.
HB 375 An Act making appropriations for the operating and
loan program expenses of state government, for
certain programs, and to capitalize funds; making
appropriations under art. IX, sec. 17(c),
Constitution of the State of Alaska; and providing
for an effective date.
HB 375 was HEARD and HELD in Committee for further
consideration.
HB 377 An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing
for an effective date.
HB 377 was HEARD and HELD in Committee for further
consideration.
HOUSE BILL NO. 347
An Act exempting taxicabs from the passenger vehicle
rental tax; and providing for an effective date.
SUE STANCLIFF, STAFF, REPRESENTATIVE PETE KOTT, testified
that HB 347 was introduced specifically to exclude a taxicab
from the definition of "passenger vehicle" in statute,
exempting taxicab rentals from the Vehicle Rental Tax.
Ms. Stancliff noted that last year, HB 271 was passed with
the intent to levy excise taxes on the rental of passenger
and recreational vehicles usable on highways and vehicular
ways. That imposed a substantial and confusing burden on
owner-leasers of taxicabs who would be required to collect
from the taxicab drivers. That was a technical and
unintended application of the Vehicle Rental Tax to
commercial taxicab lease transactions.
Co-Chair Harris asked if the taxicabs were mostly privately
owned and then leased to a company. Ms. Stancliff explained
that the taxicab vehicles are owned by operators, of which,
each purchases and maintains the taxicab, secures all the
insurance coverage including the liability insurance to the
drivers, and also arranges to obtain the rights to operate
under one of the taxicab permits currently held in the
municipality. She noted that there are testifiers on line
to address technical questions.
JAMES BRENNAN, (TESTIFIED VIA TELECONFERENCE), ATTORNEY,
HEDLAND BRENNAN, HEIDEMAN AND COOKE, ANCHORAGE, responded to
the query made by Co-Chair Harris. In Anchorage, the
taxicab owners rent or lease the cabs to the so-called
"chauffeurs" or drivers, who are independent business
people. The drivers' operate as their own independent
businessperson. They are not employees of either the owners
or the cab.
The impact of the Vehicle Rental Tax imposed on taxicab
drivers would be over and above requirement of paying a tax
on the amount that they rent the cab for, ordinarily around
$90 dollars per day shift. They make their living based on
making a profit after paying rental and other expenses. He
emphasized it is a close margin to operate on and that the
tax would be felt exclusively by the taxi cab drivers. They
would not be able to pass that tax on to the passengers
after the change is made to the regulation.
Mr. Brennan understood that the tax was not intended to
affect the local economy. He emphasized that the tax would
fall exclusively on the Anchorage taxicab drivers, having a
huge and unintended effect.
Representative Croft asked if any of those clients had
assessed it or if this would be a risk. Mr. Brennan
responded that some of the operators did receive a notice
because they operate under a business name. Some of these
people came to the law office because of the impending tax.
It was apparent that the tax created an unintended
situation. Most people do not have a good understanding of
how the industry is structured. Big cab companies do not
own the taxicabs but rather they tend to be leased out to
cab drivers. He reiterated that it was not an intended
impact.
Co-Chair Harris asked about the definition of a taxicab and
if it would include chauffeurs. Mr. Brennan advised that
under an Anchorage ordinance, there is a distinction between
a taxicab, a limousine and the catchall group called
"vehicles for hire". Taxicabs are a specific group of "on
demand" vehicles to move a person from a specific point to
another specific point. He did not believe that there are
other groups left out. In the limousine industry, the
structure is different and there are companies that own
their own limousines and hire their drivers as employees.
They would not be under this tax as there is no rental fee
unless the transaction between the customer and limousine is
a rental. The tax is only on the rental of a vehicle. He
reiterated that as the law is currently written, it would
not apply to them. The reason that it applies to a taxicab
is because there is a lease agreement.
Co-Chair Harris questioned if any limousine companies were
being charged the tax. Ms. Stancliff responded that the
only thing that "governs" that group are the licensing and
smoking regulations.
JANIS HALES, (TESTIFIED VIA TELECONFERENCE), REVENUE AUDIT,
TAX DIVISION, DEPARTMENT OF REVENUE, ANCHORAGE, offered to
answer any technical questions the Committee might have.
JOHN LYNCH, (TESTIFIED VIA TELECONFERENCE), PRESIDENT, TRUCK
RENTING & LEASING ASSOCIATION, ALEXANDRIA, VIRGINIA,
recommended that HB 347 be amended to exclude all trucks
that transport property over 10,000-pounds. The rental tax
is directed toward rental cars and not trucks that transport
property. The tax is intended for out of state tourists and
not in State residents. Under the definition of "passenger
vehicle" contained in the Alaska Code, it would apply to all
vehicles under 26,000-pounds including rental trucks.
It is a significant tax on Alaska residents and businesses
as trucks less than 26,000-pounds are generally rented to
small businesses and local residents for household moves.
Mr. Lynch urged that the Committee amend that language to
remove trucks over 10,000-pounds. He offered to work with
the Committee on structuring that language.
Co-Chair Harris inquired if the tax would apply to firms
that rent equipment. Mr. Lynch responded that it would not
and that the Department of Revenue has indicated it would
apply to all vehicles under 26,000-pounds including that
type of truck.
MICHAEL BELL, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,
ALASKA TRUCKING ASSOCIATION, ANCHORAGE, spoke to HB 347. He
noted that the definition of a commercial motor vehicle
contained in HB 241, indicates that in Alaskan statutes, a
motor vehicle is around 26,000 pounds. He asked that the
Committee consider adopting the definition of a commercial
motor vehicle listed in Alaska Statute (AS) 19.10.399, which
includes vehicles in the 26,000-pound range used for
commerce.
CHRIS FISCHER, (TESTIFIED VIA TELECONFERENCE), KACHECAB/CAB
DRIVERS, HOMER, commented on how difficult the tax will be
for the taxicab drivers in Homer, Alaska. He believed that
the tax would cause the little cab companies to go out of
business. He urged passage of the bill with corrected and
amended language.
Representative Croft referenced Page 1, Lines 5-6, and asked
if the definition of "passenger vehicle" be changed to
"motor vehicle" as defined in AS 28.40.100 and then change
the language to what is contained in AS 19.10.399 (1), the
definition of commercial motor vehicles that uses a 10,000-
pounds rather than 26,000-pounds.
Mr. Lynch responded that it could solve the commercial
trucking aspect, however, a consumer rental truck called a
"u-haul" would continue to be included.
Representative Croft asked how to solve the u-haul issue.
Mr. Lynch offered to provide that language which could
address the 10,000-pound weight threshold transporting
property. Representative Croft offered to work with Mr.
Lynch to determine language that would adequately address
these concerns.
Co-Chair Williams noted that the bill would be HELD in
Committee in order to work out the language.
HB 347 was HELD in Committee for further consideration.
HOUSE BILL NO. 375
An Act making appropriations for the operating and loan
program expenses of state government, for certain
programs, and to capitalize funds making appropriations
under art. IX, sec. 17(c), Constitution of the State of
Alaska; and providing for an effective date.
Co-Chair Williams MOVED to ADOPT work draft #23-GH2040\H,
Utermohle, 1/20/04, as the version of the legislation before
the Committee. There being NO OBJECTION, it was adopted.
Representative Croft inquired the major numerical changes
made between the two documents.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
explained that there are a number of differences. He
referenced the Agency Summary indicating the number changes
in the bill in the last column, i.e., Department of Health &
Social Services indicates a deduction of $335.0 thousand
dollars and the Department of Labor & Workforce Development
lists a reduction of $465.8 thousand dollars. (Copy on
File).
Mr. Teal pointed out that both of those reductions resulted
from intent language. Discussion followed between Mr. Teal
and Representative Croft regarding that language.
Representative Croft questioned the independent living phase
out. Mr. Teal replied that there had been a transition and
that last year, there was a one-time source of money used
with the intention that it would be a one-year hold harmless
transition period. In the current budget, the Governor's
bill made a fund change to general funds for that component.
It was removed because it was intended to be one-time money.
Representative Croft stressed that the Independent Living
component was one of the most "heart-warming" and important
needs of group testimony brought forward during the budget
process. The proposed cut would be significant to that
component. Also, cuts to the Community Matching Grant will
have tremendous consequences.
Co-Chair Harris noted that these are topics for subcommittee
discussions and then they will be addressed by the full
House Finance Committee.
HB 375 was HELD in Committee for further consideration.
HOUSE BILL NO. 377
An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date.
Co-Chair Williams MOVED to ADOPT work draft #23-GH204H\D,
Utermohle, 1/20/04, as the version of the legislation before
the Committee. There being NO OBJECTION, it was adopted.
Co-Chair Harris stated that the proposed version of the bill
attempts to take all mental health money, placing it into a
specific bill.
Representative Croft inquired the changes made from the
Governor's bill.
Mr. Teal explained the changes. The Governor's mental
health bill used some non-mental health money and the Alaska
Housing Finance Corporation (AHFC) dividend. The proposed
work draft substitutes general fund mental health dollars
for that money and transfers the dividends back to the
operating budget. Representative Croft asked if only the
fund sources had been switched and nothing had been reduced.
Mr. Teal acknowledged that was correct.
Mr. Teal pointed out the "traditional change deleting one
project from the mental health bill, knowing that the Senate
would be deleting all the other projects"; thus, making
everything comparable. Deleted from the proposed version is
a $400 thousand dollar project.
Co-Chair Harris stated that the bill would be HELD in
Committee for further consideration.
HB 377 was HELD in Committee.
ADJOURNMENT
The meeting was adjourned at 2:55 P.M.
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